Given the large stake in the stock by institutions, Persimmon's stock price might be vulnerable to their trading decisions
The top 24 shareholders own 50% of the company
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
Every investor in Persimmon Plc (LON:PSN) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 79% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
As a result, institutional investors endured the highest losses last week after market cap fell by UK£126m. The recent loss, which adds to a one-year loss of 39% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Persimmon which might hurt individual investors.
In the chart below, we zoom in on the different ownership groups of Persimmon.
What Does The Institutional Ownership Tell Us About Persimmon?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Persimmon already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Persimmon's historic earnings and revenue below, but keep in mind there's always more to the story.
LSE:PSN Earnings and Revenue Growth June 10th 2023
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Persimmon. Our data shows that BlackRock, Inc. is the largest shareholder with 9.3% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.4% and 4.4% of the stock.
A closer look at our ownership figures suggests that the top 24 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Persimmon
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our information suggests that Persimmon Plc insiders own under 1% of the company. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around UK£1.2m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 20% stake in Persimmon. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Persimmon you should be aware of, and 1 of them is concerning.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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